Republican lawmakers, along with President Donald Trump, were jubilant on the South Lawn of the White House Wednesday afternoon, celebrating passage of their $1.5 trillion tax cut. And as if on cue, a handful of big U.S. companies quickly promised to pay one-time bonuses to their employees and bump up hourly pay when the president signed the bill into law.
AT&T was the first company to make its plans public. The telecom giant said it would pay a special $1,000 bonus to more than 200,000 of its workers. And since the president signed the bill before Christmas, the bonus could hit employees paychecks over the holidays.
AT&T also confirmed it would invest $1 billion more in the U.S. in 2018, prompting a mention from President Trump during the White House event. “That’s because of what we did,” he said, “so that’s pretty good.”
Joining AT&T were Comcast, Sinclair Broadcasting Group, Boeing, Wells Fargo & Co. and Fifth Third Bancorp — the latter two promising to raise their minimum wage to $15 an hour. All within hours of the bill’s final vote in the House.
That’s certainly good news for those companies’ workers. And it’s ballast for the GOP argument that many on the middle class will benefit financially from their employers paying less in taxes.
But pardon our cynicism. U.S. companies were already doing very well — sitting on nearly $2.3 trillion in cash reserves — but have balked at faster wage increases despite conditions that generally do create pressures for higher rates of pay: Generational lows in the unemployment rate and levels of initial jobless claims. Job opening rates at record highs. Consumer confidence at a 17-year high. Record highs in labor market momentum. Record lows in people mentioning economic issues as a top concern. Employers complaining about labor shortages.
According to most economists, this is a classic recipe for faster wage growth. So it strikes us as bit disingenuous for any big company to posit that a cut in the corporate tax rate to 21 percent from 35 percent will finally allow them to share the wealth — especially since many of them have been using loopholes to pay an effective rate of only 16 percent to 18 percent.
Small wonder that many taxpayers aren’t convinced the bill will really help the middle class. Nearly two-thirds of people said they believe the package was designed mostly to help corporations and the wealthy; only 24 percent said the bill was a good idea, according to a Wall Street Journal/NBC News poll this month..
The public’s skepticism stems from a well-founded distrust of GOP claims that jobs and prosperity will trickle down to the middle and lower classes once corporations and the wealthy have more money for investment and business growth. No. It’s the other way around: True job creation comes from putting more money into the hands of ordinary people who then use it to buy things, pushing businesses to expand their operations to meet the increases in consumer demand.
“The reason CEOs aren’t investing more of their liquid assets has little to do with the tax rate,” Michael Bloomberg wrote earlier this month. “CEOs aren’t waiting on a tax cut to ‘jump-start the economy’ — a favorite phrase of politicians who have never run a company — or to hand out raises.”
Sure enough, as of Wednesday, 32 companies had announced, not new hiring plans, but share buybacks totaling $83.7 billion since the Senate passed its initial tax overhaul.
It’s no accident that telecoms and banks are prominent among the companies announcing these bonuses: those two industries make out especially well in the new tax law. Wells Fargo, for example, can look forward to an 18 percent increase in earnings, Goldman Sachs analysts say.
And how coincidental can it be that the list is thick with highly regulated industries seeking to curry favor with the Trump administration?
Boeing, which confirmed Thursday that it is in talks to buy Brazilian aircraft maker Embraer, will likely need help with foreign governments. AT&T faces opposition from the Justice Department for its intended merger with Time Warner Inc. And Sinclair, the largest owner of local television stations in the country, is bidding to become even bigger with a $3.9 billion acquisition of Tribune Media.
“Special” one-time bonuses and a bare minimum wage are nice gestures. But those are no substitute for what hard-working Americans really need — long-overdue, significant increases in wages.
As of Wednesday, 32 companies had announced, not new hiring plans, but share buybacks totaling $83.7 billion since the Senate passed its initial tax overhaul.